How to Qualify for a Short Sale

Short Sale


Imagine your circumstances have changed and you must sell your home. After meeting with a real estate professional, you are surprised to find out that your home is worth less today than the unpaid balance due to your lender. What do you do?  Will you have to foreclose or is a short sale an option for you?

This is a question many homeowners are asking in today’s housing market.  The answer to this question varies depending on the circumstances of each individual borrower. Before starting down the short sale path with your real estate professional, see if you can answer “yes” to the following general criteria:

1.     Are you experiencing a hardship?
One of the basic eligibility requirements for a short sale is that the borrower be experiencing a true hardship. A hardship is defined as what has taken place in the life of the borrower that has caused them to not be able to make good on their mortgage. It is extremely important that the borrower be honest about their situation because it will be verified during the due diligence process and the short sale will be rejected if a true hardship does not exist.

2.     Is the mortgage currently in default or is default imminent?
The first thing to consider is that many lenders and Servicers require a borrower to be in default or show that default is reasonably foreseeable.  This is to help prevent borrowers from strategically defaulting on loans in order to get out of their current obligations. Whatever the reason for the hardship, the mortgage company is going to require that it be verified.

3.    Does the Borrower have any significant assets?
Another important requirement of a short sale is verification that the borrower does not have any significant assets that can be used to pay off the mortgage.  The lender will not be willing to settle for an amount less than what is owed on a mortgage if the borrower has significant assets that could be used to pay against the mortgage that is due.

4.    Has the market value of the home decreased?
Most lenders accept short sale terms at fair market value. It is up to the listing broker to analyze the local market, recent sales and active listings to determine the current fair market value of the property.

If your answer is yes to these questions, your property may be eligible for a short sale. To find out more, contact a Certified Distressed Property Expert (CDPE). CDPE certified real estate agents will know the options of foreclosure avoidance available to homeowners.

NEW Short Sale Information!

The Federal Housing Finance Agency (FHFA) announced that both Fannie Mae and Freddie Mac have new guidelines for mortgage servicers that will essentially consolidate all short sale programs into one streamlined program. Short sale program rules will now allow lenders to qualify someone for a short sale. This will help homeowners to tell if they are eligible for a short sale more easily.

Under the new guidelines going into effect November 1, 2012:

  • Fannie Mae or Freddie Mac backed mortgages will be able to do a short sale, even if they are current on their mortgage, if they have an eligible hardship such as the death of a borrower or co-borrower, divorce or legal separation, illness or disability, or a distant employment transfer.
  • Homeowners will be able to make a financial contribution at closing in exchange for the lender not pursuing them for a deficiency judgment later, provided the homeowner has sufficient income.
  • Military personnel who are being relocated will be automatically eligible for a short sale and will be under no obligation to contribute funds to cover the shortfall between the outstanding loan balance and the sales price on their homes.
  • Subordinate-lien payments will be limited to $6,000. Previously lenders would often attempt to negotiate a higher payment from the homeowner.
  • In certain circumstances, homeowners will be eligible to receive up to $3,000 in relocation assistance.

The FHFA also recently announced that lenders:

  • Must respond to short sales within 30 days of receipt of the short sale offer.
  • Must provide weekly updates to the borrower.
  • Must communicate a final decision to the borrower within 60 days of receipt of the offer.

With these new guidelines, it now appears that homeowners who are faced with the challenge of short selling their home will finally have a smoother transaction. To find out more, contact a Certified Distressed Property Expert (CDPE). A certified real estate agent will know the options of foreclosure avoidance available to homeowners.

For a more in-depth analysis of your current situation, and to see if you could qualify for a short sale, call us today at 940-489-4140.

Short Sale Certified Distressed Property Expert


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Useful Seller Information

Dallas County Real Estate